Consultant costs for shared fire services study debated

Published May 23, 2014 at 5:00 pm

The Ramsey City Council tabled voting on paying a share of up to $18,000 in consultant work to continue fact-finding for a possible shared fire services contract with the cities of Bethel, Nowthen and St. Francis.

A significant issue that Bethel, Nowthen, Ramsey and St. Francis are addressing is pension benefits. The Rum River Regional Fire Study Group, which includes the cities of Bethel, Nowthen, Ramsey and St. Francis have been meeting since October 2011 to explore how to share fire services. It proposed hiring two consultants for a total projected cost of $18,000 to come up with a draft joint powers agreement and to figure out how to bring all relief associations to Ramsey’s benefit level. Photo by Eric Hagen

According to the a $3,277 Emergency Services Consulting study that was completed June 2013, if the pension funds were combined, “there would have to be some adjustment to the plan type as well as the service requirement. Otherwise, Chapter 424B of Minnesota Statutes should be consulted in how to best merge the existing relief associations if an operational consolidation is implemented.”

These four cities have not gotten to the point of deciding whether it should combine into one department similar to what Anoka and Champlin did or if it should just share resources such as trucks.

The Ramsey councilmembers at the May 13 meeting, which did not include Mayor Sarah Strommen and Councilmember Jill Johns who were absent, feel the city should not have to pay 67 percent of the consulting fees without any guarantee that Ramsey would have more representatives on any future fire board.

The resolution called for Ramsey to cover 67 percent, St. Francis. 21 percent; Nowthen, 10 percent; and Bethel, 2 percent. If the price comes in at $18,000, the breakdown would be: Ramsey, $12,060; St. Francis, $3,780; Nowthen, $1,800; and Bethel, $360.

Ramsey Councilmember Randy Backous also took exception to the firm of Van Iwaarden Associates being paid between $7,000 and $10,000 to “complete an analysis of the financial impact of bringing all three involved relief associations up to the Ramsey model, which is the highest level.

“I feel like we’re paying 67 percent of the cost to try to give firefighters in other cities better benefits,” Backous said.

Fire Chief Dean Kapler pointed out that the Van Iwaarden Associates was not the only part of the resolution all four city councils have been asked to vote on. The law firm of Barna Guzy & Steffen provided a quote of $8,000 to create a draft joint powers agreement that would cover issues such as representatives and voting on a new shared fire services board.

The Bethel and St. Francis city councils have already approved the resolution. Nowthen has yet to vote.

The Rum River Regional Fire Study Group was set to meet earlier this week. The Ramsey council did not specify what percentage it felt would be fair, but asked that it be discussed again, along with the voting set-up of any future board. Kapler said the cost breakdown was determined based on population and fire calls.

Pensions

A small percentage of every homeowners’ insurance policy goes into a state coffer for non-profit fire relief associations to cover firefighter retirement pensions.

Additional revenue can come from cities, but it is not always required. Investment gains can add revenue, but a down market will decrease the fund.

Ramsey and Nowthen have a joint pension account because Ramsey is reimbursed by Nowthen for providing fire protection services. This group has a defined-contribution plan. Every firefighter gets an equal share of state and municipal contributions and prorated shares of investment earnings. The amount a firefighter gets depends on how much they have accumulated over the years and how well the stock market is doing when they retire.

Municipal contributions are not required by state law, but voluntary contributions are allowed. According to the Emergency Consulting Services study, Ramsey contributed $16,208 in 2010 to its relief association that brought it up to $1.73 million in net assets and 51 active members.

Firefighters in Bethel and St. Francis have a defined-benefit pension plan, which means a guaranteed yearly benefit amount multiplied by years of service as long as they have been in the department for at least 10 years.

According to 2010 statistics shared in the Emergency Services Consulting study, the Bethel relief association’s yearly benefit amount is $488. So a Bethel firefighter who retired after 20 years would get $9,760. As of 2010, its relief association had $84,900 in the bank for 12 active members.

St. Francis’ yearly benefit for its relief association members is $2,100. So a firefighter retiring after 20 years would get a lump-sum payment of $42,000. As of 2010, its relief association had $662,836 for its 31 active members.

Bethel made an $865 municipal contribution in 2010 and St. Francis made no contribution that year. State law only requires a contribution to a defined-benefit fund if a relief association falls too far below a 100 percent funding ratio of assets and liabilities. St. Francis’ funding ratio at the time was 121 percent. A city can voluntarily make a contribution though.

Statewide, municipal contributions were much higher in 2010 and 2011 because many relief associations had to be made whole after funds were lost during the worst part of the recession. The 684 fire relief associations across the state in 2012 received $9.4 million in municipal contributions, according to a Minnesota Office of the State Auditor report. This was a 22.3 percent decrease from the $12.1 million received in 2011, mostly because required municipal contributions decreased by roughly $2.9 million.

Councilmember Mark Kuzma said he only wanted to address the joint powers agreement to settle issues like voting and not pay for Van Iwaarden Associates to research pension issues at this time.

“We could come back with an option of just focusing on the (JPA) and leaving the pension off,” Kapler said. “The two don’t have to run on parallel tracks.”

Councilmembers Chris Riley and Jason Tossey said when they saw the results of the Emergency Services Consulting study, they did not see any major savings.

City Administrator Kurt Ulrich said they would not know how much each city would be paying for firefighter pension benefits versus what they pay now until a study was completed.

“What we’re really looking at is can we structure this so that it is a benefit to Ramsey?” Ulrich said. “So that when we look things such as joint purchasing of a new ladder truck, which isn’t that far down the road, that all four communities might participate somehow.”

Councilmember John LeTourneau said this is just the next step in a long study process that he does not want to abandon.

“It feels uncomfortable to bail on it at this point,” LeTourneau said.